Article by Sneha Sharma

Govt of India, last week, rejected Tesla’s proposal for tax breaks to import electric cars. Govt said that laws already permit the import of partially built components and assembly in the nation itself. 

Understanding Tesla’s teething problems

Centre has already given green signal to Tesla to produce electric vehicles locally by assembling the car in India. However, Musk wants India to reduce its tax on import of fully manufactured EVs which can range anywhere between 25 to 100%.

Why does Musk want tax respite, you wonder? By importing pre-built vehicles ready to land directly in the Indian markets for sale, the company will get an edge in selling vehicles built overseas at competitive prices in India. 

On the other hand, currently importing electric vehicles levies tax of about 15-30% even on the parts shipped for assembly within the country’s borders. 

The Government is adopting a stringent approach towards imported commodities, as it wants the nation to be self-dependent and boost local production, in short an ‘Atmanirbhar Bharat’. 

Government has asked Tesla to demonstrate its strategies for manufacturing locally and EVs procurement. However, the company has been procrastinating over it.

Chief Ministers from at least five states in India had reached out to Elon and requested his firm Tesla to put up a store in their states, this after Musk expressed that the US electric-vehicle pioneer was still struggling to gain a foothold in the country.

Tesla must follow the footsteps of tech giants in the motor industry like Tata Motors, Mahindra & Mahindra Ltd. These companies set an example of investing in the local economy to build the future of electric vehicles in the country. There are others importing completely built units. That route is open

Vivek Johri, Chairman, CBITC

Tesla and Tax!

Tesla points out that it presently relies on heavy import tax to deal with the landing cost of components. This pushes the cost of electric vehicles to go beyond $40,000, summing up the inbound shipping prices with the original car’s worth. Elon Musk concludes this will make the vehicle out of the financial scope for most Indian consumers making it “unaffordable.”

Online reports suggest Tesla is also open to switching to local manufacturing slowly, starting with producing some auto components and moving ahead from their eventually. However, Government has it clear that it wants firm commitments to this idea. 

Tesla’s future in India at stake?

After the Tesla controversy broke out officials admitted that they were mulling over changing importing duties however no change is likely as India is witnessing strong domestic production and investment under current tariff structure.

The Union Minister Nitin Gadkari told the press that the government has also asked Tesla to stop importing China-manufactured cars in India and open doors for the organization to manufacture, export, and sell electric vehicles locally. 

For Tesla, India could be huge market to conquer, however, only time can tell if the company can untangle the taxing tangle.

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